By Moksha Financial Services Pvt. Ltd. 

Introduction

For many SMEs in India, SME loans are essential for growth — whether it’s increasing working capital, buying machinery, expanding to a new location, or managing cash flow.
Despite being creditworthy, thousands of SMEs face loan rejections every year.

The surprising truth?
Most rejections happen not because the business is weak, but because the documentation, banking behaviour, or financial ratios are not aligned with bank requirements.

The Top 10 reasons why SME loans get rejected — and how you can avoid them are outlined below - 

✅ Top 10 Reasons Why SMEs Face Loan Rejections

1️⃣ Mismatch in GST, ITR, and Financial Statements (Major Red Flag for Banks)

Banks reject a large percentage of SME loan files because GST returns, ITRs, and audited financials do not align.
Banks rely on consistency — any mismatch suggests unreliable or manipulated reporting.

Why this leads to rejection:

• GST turnover is high but ITR income is low → signals under-reporting.
  
  
• Bank credits do not match sales → creates doubt about actual revenues.
  
  
• Low profit in financials reduces DSCR, making repayment doubtful.
  
  
• Sudden fluctuations in numbers appear risky and unplanned.
  
  

Result: Banks lose confidence in the financial credibility of the business and reject the file.

2️⃣ Negative or Weak Banking Behaviour (Poor Account Conduct)

Banks analyse 12 months of current account statements. If banking discipline is weak, they reject the file regardless of turnover.

Why this leads to rejection:

• Irregular credits reflect weak business activity.
  
  
• High cash withdrawals signal non-transparent operations.
  
  
• Low or negative closing balances show poor liquidity.
  
  
• Cheque bounces indicate weak financial management.
  
  

Result: Banks believe the business may struggle with EMI payments.

3️⃣ Poor Ratio Analysis: DSCR, ICR, DER, Current Ratio (Repayment Ability Not Strong)

Banks heavily rely on financial ratios to measure a business’s financial strength.

Why this leads to rejection:

• DSCR below 1.2 → business cannot comfortably repay the loan.
  
  
• ICR below 2 → interest obligation too high compared to earnings.
  
  
• DER above 2 → business is overly dependent on debt.
  
  
• Current Ratio below 1 → liquidity crunch risk.
  
  

Result: Weak ratios signal high financial stress → banks reject the file.

4️⃣ Low or Inconsistent Income in ITR (Insufficient Repayment Capacity)

Even if business turnover is good, low income declared in ITR affects loan approval immediately.

Why this leads to rejection:

• Low income means low repayment ability on paper.
  
  
• Sudden jumps or drops in income raise suspicion.
  
  
• Losses in any year weaken financial profile.
  
  
• Banks approve loans only based on declared income, not verbal claims.
  
  

Result: Low ITR income = low sanctioned amount or straight rejection.

5️⃣ Weak CIBIL or Credit Score (Past Credit Behaviour Not Good)

Banks treat your CIBIL score as proof of how responsibly you manage debt.

Why this leads to rejection:

• CIBIL below 700 indicates past delays or defaults.
  
  
• Multiple recent inquiries signal credit hunger.
  
  
• High credit card utilisation shows financial pressure.
  
  
• Old unpaid issues reduce trust in repayment behaviour.
  
  

Result: Bad CIBIL = immediate rejection before the file even opens.

6️⃣ Improper or Incomplete Documentation (Compliance Failure)

Documentation is the backbone of underwriting, and any missing or incorrect document stops the file instantly.

Why this leads to rejection:

• Missing GST, ITR, bank statements → assessment becomes impossible.
  
  
• Incomplete business proof raises doubts about legitimacy.
  
  
• Errors in property papers (LAP) create legal risk.
  
  
• Outdated or unsigned documents show lack of financial discipline.
  
  

Result: Banks reject incomplete files to avoid compliance issues.

7️⃣ Cash-Heavy Business Without Proper Accounting (Non-Transparent Operations)

Businesses that depend heavily on cash without proper invoices or accounting face higher rejection.

Why this leads to rejection:

• Cash sales without proof are not accepted by banks.
  
  
• No invoices = no verifiable revenue.
  
  
• Incomplete books show weak financial control.
  
  
• Cash-heavy operations reduce tax visibility.
  
  

Result: Banks only fund businesses with traceable, documented income.

8️⃣ Poor Property Valuation in LAP (Insufficient Collateral Value)

When applying for Loan Against Property, the final loan amount depends entirely on valuation.

Why this leads to rejection: 

• Property value comes lower than expected.
  
  
• Old, disputed, or unapproved properties reduce loan eligibility.
  
  
• Banks follow strict LTV guidelines; low valuation = low loan.
  
  
• Structural or legal issues make the property non-marketable.
  
  

Result: If the collateral is weak, the loan is rejected regardless of business strength.

9️⃣ Multiple Loan Applications at the Same Time (High Credit Risk Signal) 

When a borrower applies to many banks together, it creates a negative impression.

Why this leads to rejection:

• Multiple inquiries reduce CIBIL score.
  
  
• Banks assume the borrower is desperate for funds.
  
  
• Underwriters fear the borrower may take loans from multiple banks at once.
  
  
• Creates confusion during verification.
  
  

Result: Too many applications = high-risk profile → rejection.

???? No Clear Purpose of Loan (Uncertain or Unjustified Requirement) 

Banks need a clear and logical purpose behind the loan request.

Why this leads to rejection:

• No supporting documents for usage (work orders, purchase orders, projections).
  
  
• Generic reasons like “business expansion” without detail.
  
  
• Inaccurate or unrealistic growth projections.
  
  
• Unclear purpose signals possible misuse of funds.
  
  

Result: Banks approve only those applications where the purpose is justified, structured, and documented.

⭐ How to Avoid Loan Rejection 

 ✔ Clean GST + ITR
✔ Strong banking
✔ Maintain good financial ratios
✔ Updated documentation
✔ Avoid multiple loan inquiries
✔ Improve CIBIL
✔ Clear loan purpose
✔ Prepare CMA data properly 

⭐ Conclusion 

Loan rejection doesn’t always mean your business is weak — most rejections happen because documentation and numbers don’t match bank policy.

Moksha Finance helps SMEs, builders, contractors, doctors, traders, and startups prepare bank-ready files for faster approval and higher limits. 

???? Ready to Apply for an SME Loan?  

???? Contact Moksha Finance for Loan Assistance

In today’s fast-moving business world, even the best ideas need fuel—and that fuel is credit funding. For small business owners and startups in cities like Indore, Bhopal, Mumbai, and Pune, securing timely capital can mean the difference between seizing an opportunity and missing out. That’s where a well-structured SME loan comes into play. 

At Moksha Financial Services Pvt. Ltd., we specialize in empowering small businesses through smart, flexible, and growth-oriented lending solutions.

Moksha Finance – Free from your financial worries!!

Why Small Businesses Need SME Loans

Small businesses are the heart of the Indian economy. But managing cash flow, expanding operations, or even covering day-to-day expenses can become challenging without external support.

Here are common situations where an SME loan for small business becomes essential:

• Purchasing raw materials or stock
  
  
• Paying employee salaries or vendor bills
  
  
• Upgrading machinery or IT infrastructure
  
  
• Expanding to a new location or branch
  
  
• Meeting seasonal or bulk order demands
  
  

Without proper funding, many businesses are forced to delay plans or compromise on quality—costing them growth.

 SME Loan Products Offered by Moksha Finance

We provide multiple financing solutions tailored to the needs of startups, manufacturers, traders, and service providers. Whether you’re looking for flexibility, low interest, or long-term support—we’ve got you covered.

???? Cash Credit (CC)

A working capital loan based on your stock and receivables.

• Interest is charged only on the used amount
  
  
• Requires monthly stock statement
  
  
• Collateral: Property or business assets
  
  
• Perfect for managing daily operations
  
  

???? Overdraft (OD) Facility

Need flexibility without stock reporting? This option is ideal.

• Property-based collateral required
  
  
• No monthly DP calculations
  
  
• Quick renewals and 1-year validity
  
  

???? Working Capital Term Loan (WCTL)

Structured like a term loan but designed for working capital needs.

• Fixed EMIs over up to 7 years
  
  
• Less paperwork than CC/OD
  
  
• No stock statements needed
  
  

???? Export Packaging Credit (EPC)

Designed for exporters, this is a cost-effective alternative to CC.

• Lower interest
  
  
• Split into pre- and post-shipment finance
  
  
• Best for businesses with international buyers
  
  

???? Factoring (Invoice Discounting)

Turn invoices into immediate cash without waiting for 60–90 days.

• Based on the buyer’s credit profile
  
  
• Best suited for blue-chip customer invoices
  
  
• Fast processing and no collateral needed
  
  

 Benefits of SME Loans from Moksha Finance

Choosing Moksha means choosing growth with smooth and faster credit funding. Here’s why:

•  Customized Loan Structures – Whether you need ₹50 lakhs or ₹5 crores, we build a plan for you.
  
  
•  Fast Approvals – We know time is money.
  
  
•  Collateral Flexibility – Property, Insurance policies, FDs accepted.
  
  
•  Transparent Processing – No hidden fees or surprises.
  
  
•  Local Support – Our team is available to assist you in Indore, Bhopal, Mumbai, and Pune and its nearby cities/town.
  
  

When you choose us, you're not just getting a loan—you’re gaining a partner who will look into your financial aspects.

Why Moksha Finance?

With 20+ years of experience in MSME lending, our team at Moksha Financial Services knows how to navigate complexities—whether it's assessing drawing power, evaluating property, or building a flexible repayment plan.

Our promise:
“Moksha Finance – Free from your financial worries!!”

We believe that financing should be simple, fast, and growth-driven. That’s why we’re here—not just to lend, but to partner with your potential.

 Ready to Grow Your Business?

If you’re a small business owner looking to take your business to the next level, don’t let cash flow be the reason you fall behind. Let Moksha Finance help you with tailored SME loans and cost-efficient alternatives that assisst you to achieve your business goals.

 Apply for an SME Loan Today
Serving: Indore | Bhopal | Mumbai | Pune 
Call us now  - +91-9111666847
visit our website to get started -  www.mokshafinance.com 

Home Loan Tax Benefits can be quite a daunting thing to understand. For someone who is not familiar with financial terms and regulations, the topic of Home Loan and Tax Benefits can truly send them over the edge. But in India, a property is said to be the best investment and to own property you need to understand how Home Loans work.

Home loan EMI calculator is the most important thing you need to be familiar with before you get your Home Loan in Mumbai. EMI’s are the monthly installments that you have to pay towards repaying your loan. The second thing you need you to know is Tax Benefit on repaying your interest and principal amount.

The Income Tax Act has made provisions for home loan borrowers, so that they can finally fulfill their desire of having a dream of home come true. There are three sections in the Act that give you Tax Benefits On Home Loan. You should know these for reducing your tax burden. Here’s what they are.

1. Section 80C: This section states that you can claim tax benefits of up to Rs 1.5 lakh on repayment of the principal amount of your loan. In simple terms, you can reduce up to Rs. 1,50,000 from your taxable income through section 80C.

2. Section 24: This section states that you can claim tax benefits of repayment of interest on housing loan up to Rs. 2 Lakh. This limit applies for a self-occupied property and vacant property. If you are renting out your property or your property is vacant than also deduction is available of entire amount. So, you can claim the entire interest amount as a tax benefit.

3. Section 80EE: This section states that if you are a first-time buyer then you can claim an extra Rs 50,000 as tax benefits on the interest repayment in financial year. you can also claim deduction if you have fully repaid the loan.

Another thing to know about house loans is the Pradhan Mantri Awas Yojana. The PM Awas Yojana is an interest subsidy scheme that has been named as ‘Credit Linked Subsidy Scheme for Economic weaker sectiom Groups – CLSS (EWS)’. As per this new subsidy, Economic Weaker Section groups with incomes in the eligible range will get a subsidy on their home loan interest rates of three to four percent. This scheme has been devised to ensure that more and more people can avail of home loans and fulfill their dreams of owning a home of their own.

If you want to get a house loan, it is now easier than ever to get it. You can simply go online and get yours. Owning a home of your own was never this easy.